Direct Earnings Attachments – What are they?

If you are using the Pierce Payroll department to process your payrolls, you need not worry too much about the following information, (just forward everything to us and we’ll deal with it) however if you are running your own payroll, you need to be abreast of the very latest in Government requirements of employers.

The Direct Earnings Attachment scheme is currently being piloted by the Department for Work and Pensions in this region and our payroll team have had to deal with the very first of these, this week.

What is a Direct Earnings Attachment?

The DWP is responsible for debt owed in the UK under the Social Security Administration Act 1992. When the secretary of state, or authority administering Housing Benefit, has not been able to recover money owed to the DWP by individuals no longer receiving benefits, the debt may be recovered by a deduction from the individual’s earnings. Unlike some other deduction orders, the DWP can issue a Direct Earnings Attachment without going through the civil courts.

Applying a DEA

A DEA has its own regulations which follow some of the workings of a Deduction from Earnings Order (DEO) and some workings of an Attachment of Earnings Order (AEO). But a DEA does not replace any of these other orders and in some circumstances employers may receive requests to implement deductions for a DEO and a DEA for the same employee. If an employee does have other deduction orders the following take priority over a DEA:

As part of the pilot, employers are being asked to operate a DEA to make deductions directly from an employee’s earnings.

Table of amounts to be deducted by employer

TABLE A: WHERE EARNINGS ARE PAID WEEKLY

AMOUNT OF NET EARNINGS

(Net earnings are gross pay, less tax, National Insurance and pension contributions)

DEDUCTION (PERCENTAGE OF NET EARNINGS)

(Net earnings are gross pay, less tax, National Insurance and pension contributions)

Less than and exactly £100

Nil

Exceeding £100 but not exceeding £160

3

Exceeding £160 but not exceeding £220

5

Exceeding £220 but not exceeding £270

7

Exceeding £270 but not exceeding £375

11

Exceeding £375 but not exceeding £520

15

Exceeding £520

20

TABLE B: WHERE EARNINGS ARE PAID MONTHLY

AMOUNT OF NET EARNINGS

(Net earnings are gross pay, less tax, National Insurance and pension contributions)

DEDUCTION (PER CENT. OF NET EARNINGS)

(Net earnings are gross pay, less tax, National Insurance and pension contributions)

Less than and exactly £430

Nil

Exceeding £430 but not exceeding £690

3

Exceeding £690 but not exceeding £950

5

Exceeding £950 but not exceeding £1,160

7

Exceeding £1,160 but not exceeding £1,615

11

Exceeding £1,615 but not exceeding £2,240

15

Exceeding £2,240

20

If you are using a computerised payroll system and you receive a request to set up a DEA you will need to;

1. Manually calculate the amount to deduct from earnings.

2. Check whether there are any other orders currently in place – as these may take priority over the DEA.

3. Ensure that the total of all orders including the DEA does not exceed 40% of the employee’s earnings.

4. If the total deductions exceed 40%, adjust the amount of the DEA

Your responsibilities

As an employer, you have a legal obligation to: implement a Direct Earnings Attachment when required by making deductions from the employee’s net earnings, i.e. after deduction of:

o income tax

o Class 1 contributions

o Amounts deductable by way of contributions to a work place pension scheme which provides payment of annuities or lump sums:

continue to operate the DEA until the DWP advise you to stop or your employee leaves

If you fail to comply, you may be subject, on conviction, to a fine of up to £1,000.

Providing information to the DWP

– you have a duty to notify them if:

they ask you to operate a DEA for someone who does not work for you,

an employee for whom you are operating a DEA leaves your employment

you are a new business (which starts between 8 April 2013, and 31 March 2014), or a micro business (having fewer than 10 employees), as defined in the Regulations. If you are a new or micro business you are not obliged to operate a DEA although you may do so if this is agreed with your employee.

You must write to them at the address shown on the DEA request letter within 10 days if any of the above applies to you.

To your employee – you have a duty to:

Notify your employee in writing of:

o the amount of the deduction taken, including any amount taken for administrative costs.

You must do this (and record it) no later than the payday after the one on which the deduction for the DEA was taken.

The definition of earnings for DEAs

The table below lists what counts and what does not count as earnings .

Counts as ‘earnings’ for DEA

What does not count as ‘earnings’ for DEAs

Wages

Statutory Maternity Pay

Salary

Statutory Adoption Pay

Fees

Ordinary Statutory Paternity Pay

Bonuses

Additional Statutory Paternity Pay

Commission

Any pension, benefit, allowance or credit paid by DWP, a local authority or HMRC

Overtime pay

A guaranteed minimum pension under the Social Security Act Pensions Act 1975

Most other payments on top of wages

Amounts paid by a public department of the Government of Northern Ireland or anywhere outside the United Kingdom

Occupational Pensions, if paid with wages or salary

Sums paid to reimburse expenses wholly and necessarily incurred in the course of the employment

Compensation payments

Pay or allowances as a member of Her Majesty’s forces, other than pay or allowances payable to them by you as a special member of a reserve force

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